New rules for the Swiss financial centre in the form of FinSA and FinIA – an update

The Swiss financial centre is facing a fundamental restructuring of its regulation. No less than three new pieces of legislation (the Financial Market Infrastructure Act, FMIA, the Financial Services Act, FinSA, and the Financial Institutions Act, FinIA) are set to replace large parts of the previous regulatory regime. The FMIA has already been passed by the Swiss parliament and will enter into force on 1 January 2016 together with the relevant implementing ordinances.

The Federal Council also opened the consultation on FinSa and FinIA on 27 June 2014. The consultation closed on 17 October 2014. At the time we informed you in a brochure about the impact of these two regulatory texts. The Federal Council has now drafted the FinSA and FinIA bills, which were published on 4 November 2015. It will be very interesting to see how the parliamentary debate unfolds. Following the publication of the FinSA and FinIA bills we enclose an updated version of our brochure.

Read more: New rules for the Swiss financial centre in the Financial Services Act and the Financial Institutions Act – November 2015 update

Financial Institutions Act (FinIA)

One of the main new features of the FinIA bill is a proposed ‘authorisation hierarchy’ and the inclusion of independent asset managers and trustees within this hierarchy. Authorisation on a particular level of the hierarchy will encompass authorisation for all activities at lower levels. This means that unlike today, a bank will no longer need to obtain additional authorisation as a securities dealer (or as it is now termed, an investment firm) if it engages in securities dealing.

By consolidating the regulations into a single law, materially unjustifiable differences that existed between the different forms of authorisation will be eliminated. The introduction of an explicit ‘clean money’ strategy subject to regulatory enforcement was proposed in the original FinIA consultation draft but has been dropped again in the Federal Council bill.

Independent asset managers and trustees are to be subject to an authorisation requirement for the first time. As this will involve additional costs for independent asset managers (who often have just one or a small number of employees), this change will probably have an impact on the market (closures, mergers).

Financial Services Act (FinSA)

In the past, regulation has largely been confined to institutions and players based in Switzerland. The activities of market players without an actual presence in Switzerland (in the form of a representative office, branch or subsidiary) were unaffected. This is set to change in part through the introduction of a registration requirement for client advisors at these market players. The new registration requirement will at least partly offset the competitive disadvantage of Swiss financial institutions in their international business, and gives the supervisory authorities an overview of the financial services being offered cross-border in Switzerland, which were previously completely uncontrolled.

The treatment of trailer fees that has been repeatedly confirmed by the Federal Supreme Court in recent years is enshrined in law in the FinSA bill. This also applies to execution-only activities.

Other changes:

  • Increased disclosure, documentation and explanatory obligations for all financial services providers
  • New training requirements for client advisors
  • Product-specific documentation requirements (prospectus, basic information sheet)

As one of the objectives of FinSA is an improvement in customer protection, the draft bill also contains a number of changes relating to the assertion of customer claims against financial institutions. Based on a comprehensive right to documentation and access to an ombudsman, more favourable cost arrangements for clients in civil proceedings are to be introduced.

If you have any further questions please contact:

Guenther Dobrauz, Partner
Leader Legal FS Regulatory & Compliance Services
Office: +41 58 792 14 97
Email: guenther.dobrauz@ch.pwc.com
PricewaterhouseCoopers AG Birchstrasse 160 | Postfach | CH-8050 Zurich

Simon Schären, Manager
Legal FS Regulatory & Compliance Services
Office: +41 58 792 14 63
Email: simon.schaeren@ch.pwc.com
PricewaterhouseCoopers AG Birchstrasse 160 | Postfach | CH-8050 Zurich

Flash News: Potential delays for some parts of MiFID II/MiFIR

ESMA announced on 10 November 2015 that it pleaded with the Commission to delay certain parts of MiFID II/MiFIR. The entire MIFID II/MiFIR framework was supposed to be applicable as of  January 2017. However, all the final Level 2 texts are still not ready. The Commission hasn’t yet endorsed the Final technical advice and the Final drafts of Regulatory and Implementing Technical Standards RTS/ITS), submitted by ESMA in 2014 and 2015  espectively. ESMA has yet to prepare many others RTS/ITS in 2016.

Delays to some parts of MiFID II/MiFIR?

Steve Maijoor, the ESMA Chair delivered a statement to the Economic and Monetary Affair Committee (ECON) at the European Parliament on 10 November 2015. He provided the Eurodeputies with an update on the ESMA work on MiFID II/MiFIR II and the consequences on the implementation timeline.

The ESMA Chair insisted on the fact that the delay to build the necessary – MiFID II/MiFIR compliant- IT systems is hardly compatible, and in some aspects even incompatible, with the initial regulatory timeline. Moreover, there are still some uncertainties related to what will be in some of the final texts:

“The timing for stakeholders and regulators alike to implement the rules and build the necessary IT systems is extremely tight. Even more, there are a few areas where the calendar is already unfeasible. This relates to the fact that it will take some time, and well into 2016, before the text of  the RTS will be stable and final. […] We have therefore raised these timing issues with the European Commission, and the fact that some IT systems will not be ready in January 2017, and the uncertainty this will create as they are needed for the execution of certain elements of MIFID II. Related to that, we have raised with the Commission whether this uncertainty would need a legislative response with delaying certain parts of MIFID II, mainly related to transparency, transaction and position reporting.” (Steve Maijoor, Speech to ECON, 10 November 2015)

ESMA has thus suggested to the European Commission to postpone the implementation timeline for some aspects of the MiFID II/MiFIR:

1.      Transparency
2.      Transaction reporting
3.      Position reporting

With respect to transaction reporting, ESMA highlights that both ESMA/Supervisors and the investment firms/trading venues need to build complex IT systems “(almost) from scratch” to allow the former to determine aggregate positions in commodity  derivatives at group level, and the latter to reshape their transaction and reference data  reporting systems.

When it comes to transparency and position reporting, ESMA explains that the assessment of the pre-transparency waivers and of the proposals for setting position limits will be “extremely resource-intensive” if the initial deadline is kept, “given the sheer volume of financial instruments covered”.

The EU institutions will have to decide whether to postpone these aspects of the MiFID II/MIFIR framework.  

Based on the latest ECON discussions, held on 11 November 2015, the European Commission appears to agree with ESMA “that a delay is needed” and that “the simplest and most legally sound approach would be a one-year delay”. The European Parliament, however, appears to strongly oppose the delay. Its rapporteur, Markus Feber, mentions that “postponement of implementation of the cornerstone legislation of financial markets in the EU is not in line with G20 commitments”.

How PwC can help

PwC can support you in assessing the impacts of MiFID II/MiFIR and identifying the gaps. Our qualified professionals can also directly support or re-enforce your teams in the implementation of these requirements.

PwC will keep you informed of any updates regarding the MiFID II/MiFIR timeline.
If you have any further questions do not hesitate to contact us.

German business becomes simpler for Swiss banks

The Swiss Financial Market Supervisory Authority (FINMA) and Germany’s Federal Financial Supervisory Authority (BaFin) recently agreed to a ‘simplified exemption procedure’ and the corresponding measures. This accord makes it easier for Swiss banks to gain entry to the German market.

Get some details and find out more in our attached summary.

German business becomes simpler for Swiss banks

ESMA’s advice on the possible extension of the AIFMD passport to non-EU AIFMs and AIFs – its implications for Switzerland

On 21 July 2013, the EU Alternative Investment Fund Managers Directive (AIFMD) became effective across the EU. The AIFMD foresees a passport, which is currently restricted to EU AIFMs and AIFs, but could be potentially extended to third countries in the future. The key provisions of the AIFMD were indirectly transposed into Swiss law by way of partial revision of the Swiss Collective Investment Schemes Act (CISA) and its accompanying ordinance (CISO) to ensure equivalence of Swiss regulation with the new EU standards.

Article 67(4) of the AIFMD required ESMA to issue advice on the application of the passport to the management and/or marketing of non-EU AIFs by EU AIFMs in the member states and the management or/and marketing of AIFs by non-EU AIFMs in the member states. Consequently ESMA launched a call for evidence in November 2014 aimed at gathering information from EU and non-EU stakeholders on the functioning of the EU passport.

On 30 July 2015, ESMA issued its advice on the application of the passport to non-EU AIFMs and AIFs in accordance with the rules set out in Article 35 and Articles 37 to 41 of the AIFMD. This advice sets out ESMA’s view on the application of the AIFMD passport mechanism to Guernsey, Hong Kong, Jersey, Singapore, Switzerland and the United States of America as non-EU countries: ESMA came to the conclusion that, for Switzerland, it sees no significant obstacles regarding the status of cooperation agreements, investor protection, market disruption, completion and the monitoring of systemic risk.

This may, for the first time, open the door for Swiss-based financial intermediaries, in this case AIFMs, to access an EU-passport and consequently allow them to compete on equal terms in the arena of the harmonised EU market.

Detailed Considerations of the ESMA Advice

If you have any questions, please contact our experts: